I need some advice

[Revlefty]

I need some advice. My parents are snow birds who have owned a house in Florida for 26 years. They announced that they are too old to make the migration trip anymore, so they are ready to give me their Florida house. I’m three years away from ER.

Originally, I had intended to allow Dad to sell the house and give me the money. It does not make sense financially to own a place a thousand miles away that you can only use five weeks per year. It would cost me $9,000 per year in rent, utilities, insurance, etc. to own the house. Plus, my DW isn’t keen to the idea of owning a place so far away with no one to take care of it. Financially, it does not make sense.

But emotionally, it is a different story. I’ve dreamed about owning the house in Florida for years. It is a good house in a nice park. And it has a nice palm tree in the front yard!

The interest we’d get by investing the $40,000 would be $1200 per year (at 3% interest). That would be offset by approximately $1500 per year we’d spend on cheap motels going on vacation. So that cancels out each other.

I’ve been looking on-line at houses and condos in the area in the $40,000 - $60,000 range and I’m not impressed. I think we would be getting (in my parent’s house) far more than what we could buy. Plus, very few of the mobile home parks are pet friendly—and we have two dogs.

DW would like to rent for a few years after we retire, but the vacation rentals aren’t cheap either. I could take possession of the house and if it doesn’t work out, I could sell it in a year or two and my parents wouldn’t object.

HELP! Am I crazy for wanting something even if it doesn’t make sense financially. I’m normally a very frugal person who is trying my best to get my family to de-clutter. But now I’m wanting to add a major element to my life. Any advice?

 

[pb4uski]

Could you rent it for a few years and cover your carrying costs until you ER?

 

[Revlefty]

That's an option, but I've never been a landlord before, so I'm nervous... especially because it is so far away.

 

[Fishingmn]

Could you rent it for a few years and cover your carrying costs until you ER?

This was my initial thought too - you could hire a property manager.

An alternative could be to hire a property manager but do it as a vacation rental (or do VRBO without a property manager). That would allow you to use it for the weeks you might like to go there and maybe get weekly income for some of the other weeks in the meantime.

 

[someguy]

I vote strongly against becoming a landlord, given that you've never done it before, are so far away, and so close to ER.

It sounds like you don't really want a place in Florida, but think this may be a "deal of a lifetime". My take is that something you don't want isn't worth buying at any price. It's like buying that cashmere sweater on closeout because it's only $5 even though it doesn't really fit right and isn't your best color. But you buy it anyway because it's so cheap and it'll never be this cheap again. And then it sits in the closet collecting dust.

 

[jimnjana]

if they are in a 55 plus community the "office" may manage the rental of the place for you. There are lots of homes with nice palm trees in the front yard in Florida, so I wouldn't let your emotions get the best of you. A 26 year old home in Florida is not the same as a 26 year old home in many other parts of the country.

 

[Revlefty]

I vote strongly against becoming a landlord, given that you've never done it before, are so far away, and so close to ER.

It sounds like you don't really want a place in Florida, but think this may be a "deal of a lifetime". My take is that something you don't want isn't worth buying at any price. It's like buying that cashmere sweater on closeout because it's only $5 even though it doesn't really fit right and isn't your best color. But you buy it anyway because it's so cheap and it'll never be this cheap again. And then it sits in the closet collecting dust.

This would definitely not collect dust. it's more like a snowmobile or pair of skiis that you spend a lot of money on but don't get to use except a couple times a year.

And, no. I really do want a place in Florida. I love the beaches, the sand and the laid back style (even though the traffic can drive you nuts).

 

[Animorph]

I'd probably try it for a year or two just to be sure. After that you have a solid case to present to your parents about why it just didn't work for you and you want to sell.

 

[someguy]

This would definitely not collect dust. it's more like a snowmobile or pair of skiis that you spend a lot of money on but don't get to use except a couple times a year.

And, no. I really do want a place in Florida. I love the beaches, the sand and the laid back style (even though the traffic can drive you nuts).

I misunderstood/misread your OP on your desire. But my advice on not becoming a landlord lightly I still stand by.

 

[Revlefty]

I do appreciate that advice.

 

[Golden sunsets]

I need some advice. My parents are snow birds who have owned a house in Florida for 26 years. They announced that they are too old to make the migration trip anymore, so they are ready to give me their Florida house. I’m three years away from ER.

Originally, I had intended to allow Dad to sell the house and give me the money. It does not make sense financially to own a place a thousand miles away that you can only use five weeks per year. It would cost me $9,000 per year in rent, utilities, insurance, etc. to own the house. Plus, my DW isn’t keen to the idea of owning a place so far away with no one to take care of it. Financially, it does not make sense.

But emotionally, it is a different story. I’ve dreamed about owning the house in Florida for years. It is a good house in a nice park. And it has a nice palm tree in the front yard!

The interest we’d get by investing the $40,000 would be $1200 per year (at 3% interest). That would be offset by approximately $1500 per year we’d spend on cheap motels going on vacation. So that cancels out each other.

I’ve been looking on-line at houses and condos in the area in the $40,000 - $60,000 range and I’m not impressed. I think we would be getting (in my parent’s house) far more than what we could buy. Plus, very few of the mobile home parks are pet friendly—and we have two dogs.

DW would like to rent for a few years after we retire, but the vacation rentals aren’t cheap either. I could take possession of the house and if it doesn’t work out, I could sell it in a year or two and my parents wouldn’t object.

HELP! Am I crazy for wanting something even if it doesn’t make sense financially. I’m normally a very frugal person who is trying my best to get my family to de-clutter. But now I’m wanting to add a major element to my life. Any advice?

It would cost you $9,000 a year for a property only worth $40,000? If that's true, I would sell the property in a New York minute.

 

[MichaelB]

I need some advice. My parents are snow birds who have owned a house in Florida for 26 years. They announced that they are too old to make the migration trip anymore, so they are ready to give me their Florida house. I’m three years away from ER.

Originally, I had intended to allow Dad to sell the house and give me the money. It does not make sense financially to own a place a thousand miles away that you can only use five weeks per year. It would cost me $9,000 per year in rent, utilities, insurance, etc. to own the house. Plus, my DW isn’t keen to the idea of owning a place so far away with no one to take care of it. Financially, it does not make sense.

But emotionally, it is a different story. I’ve dreamed about owning the house in Florida for years. It is a good house in a nice park. And it has a nice palm tree in the front yard!

The interest we’d get by investing the $40,000 would be $1200 per year (at 3% interest). That would be offset by approximately $1500 per year we’d spend on cheap motels going on vacation. So that cancels out each other.

I’ve been looking on-line at houses and condos in the area in the $40,000 - $60,000 range and I’m not impressed. I think we would be getting (in my parent’s house) far more than what we could buy. Plus, very few of the mobile home parks are pet friendly—and we have two dogs.

DW would like to rent for a few years after we retire, but the vacation rentals aren’t cheap either. I could take possession of the house and if it doesn’t work out, I could sell it in a year or two and my parents wouldn’t object.

HELP! Am I crazy for wanting something even if it doesn’t make sense financially. I’m normally a very frugal person who is trying my best to get my family to de-clutter. But now I’m wanting to add a major element to my life. Any advice?

How close to the beach is it, how close are you to achieving your financial goals, and how would they be affected by owning this property?

 

[Meadbh]

$9000 per year is a lot to spend on a vacation property, no matter what its market value. You're right, it makes no economic sense. If you accept this gift from your parents, and later sell it, I presume that you will be liable for tax on capital gains. If you don't want to rent it, the house has the potential to be an economic albatross for you. At the every least, you need an appraisal at the time you accept this gift. Alternatively, you could explain to your parents that the upkeep of this property is simply not something you can sustain, and gently suggest that they sell it with your help.

 

[Revlefty]

How close to the beach is it, how close are you to achieving your financial goals, and how would they be affected by owning this property?

It's seven miles from the beach, which is fine with us. I'm on track to reaching financial goals, but our cash account/emergency fund would certainly be affected by owning. Spending $9,000 per year for a $40,000 property doesn't sound very sensible, does it?

 

[outdoorgirl02]

Just a thought - we have a vacation property in another area that we rent out on vrbo and it pays for itself and makes us some money. We have a great cleaning company who handles cleaning and maintenance issues and is local to that area. We get to use it whenever we want but it doesn't cost us anything except some time to manage the rental inquiries.

 

[prudent_one]

Are you saying the house would sell for $40,000? If you sell it now, and save the $9,000 X 3 years you'd spend if you kept it, you'd have $67,000 in 3 years when you ER. Couldn't you then buy something in Florida even better at that time?

 

[ggbutcher]

I'd say it's hard to ignore a gift of an undervalued property. Property taxes and (hopefully) minimal maintenance would take a fair number of years to wipe out the resale value. I'm assuming you're the sole heir; don't want to even consider the complications of dealing with siblings on this...

I'd enter the rental market very carefully. Your success at that IMHO depends on two things: 1) the reliability of the property in terms of mechanical and structural integrity (low maintenance costs, in other words), and 2) a good local manager. I held onto a place in Cocoa Beach for almost ten years after leaving due to market woes, and I was able to keep mosty reliable renters in it due to the management efforts of a friend and former neighbor in the complex who didn't want to live near problems. The place was new when I bought it, so structural/mechanical didn't turn out to be an big issue. I was lucky.

 

[Finder]

It's seven miles from the beach, which is fine with us. I'm on track to reaching financial goals, but our cash account/emergency fund would certainly be affected by owning. Spending $9,000 per year for a $40,000 property doesn't sound very sensible, does it?

On the surface it doesn't appear very sensible, but it really all depends on its value to you and if you can afford to maintain this place by using it very little (or being forced to use it during your vacation time because you feel guilty you are already paying for it) or becoming a landlord which can be good or really bad.

 

[RE2Boys]

Keep in mind that since it is a gift, your basis in this second home would be the same as your parent's basis. So if they purchased it many years ago for $18,000, made improvements of $2000, and you sold it for $40,000, you would be responsible for the taxes on a $20,000 capital gain.

 

[Buckeye]

Very curious how a home in a mobile home park ends up costing you $9000 per year. Is that all lot rent or are they still making payments on the property? Can you get homeowners insurance on a manufactured home? I always thought of them as disposable housing here in Florida.

 

[Meadbh]

Another way to look at it....

If you were to withdraw $9000 in annual expenses for a vacation home, how much would you need to add to your portfolio? Assuming a withdrawal rate of 4%, you would need $225,000. Is the property worth that to you?

 

[Revlefty]

Another way to look at it....

If you were to withdraw $9000 in annual expenses for a vacation home, how much would you need to add to your portfolio? Assuming a withdrawal rate of 4%, you would need $225,000. Is the property worth that to you?

Not that much.

My parents only purchased this home four years ago, so the gain would only be around $4,000.

The $9,000 includes lot rental, utilities, insurance, etc.

OK folks, I think you've talked some sense into me. It just doesn't look like I should keep it. Emotionally, that is hard, but realistically, I needed friends in this forum to talk some sense into me. Thanks.

I'll just have to wait a couple of years until ER and find a place with two palm trees out front.

 

[sheehs1]

It's seven miles from the beach, which is fine with us. I'm on track to reaching financial goals, but our cash account/emergency fund would certainly be affected by owning. Spending $9,000 per year for a $40,000 property doesn't sound very sensible, does it?

Are you certain it will cost you just the $9,000. Don't know if you have factored in taxes (didn't mention), travel to and from, ongoing maintenance, etc.

So let's call it $11,000 (margin for error). In 10 years, you will have put $110,000 towards a $40,000 property. No chance of getting that money back unless you rent it out to cover it's costs.

Note: Posted this before I got to the last post!